Mexico's largest mortgage originator, Instituto del Fondo Nacional de la Vivienda para los Trabajadores (Infonavit), closed its third RMBS on July 15. Sized at Ps1.16 billion ($109 million), the transaction with a twenty year final priced at an inflation-indexed 5.939%, a spread of 122 basis points over a five-year interpolated government curve, according to a source close to the deal. The duration of the deal is five years. With the book oversubscribed by about 2.7 times, public pension funds snapped up 50%, insurance companies took 30%, and company pension funds bought the remaining 20%, according to the source.

BBVA Bancomer and Inversora Bursatil led the deal, which brings total issuance under Infonavit's current Ps4 billion shelf to Ps2.4 billion. Moody's Investors Service and Standard & Poor's rated the deal Aaa.mx' and mxAAA' on their national scales, respectively. Nacional Financiera is the trustee.

The source said that Mexican investors are increasingly warming up to securitization because of a greater understanding of the sector's mechanics. "We used to have to speak about the deal in investor presentations," the source said. For Infonavit's most recent roadshow there was less of a need to focus on structure. He added, "We made presentations about the issuer, it almost wasn't necessary to talk about the deal."

In step with previous transactions by the state-owned giant, Infonavit is servicing its own portfolio. The underlying portfolio consists of residential mortgages to low-income borrowers, with the longest loans bearing a 30-year maturity. There are 7,833 mortgages in the pool, which totals Ps1.49 billion and has an average weighted yield of 8.03%, adjusted by changes in the Minimum Salary Multiple index of Mexico City.

All the mortgages in the pool are linked to that same index, which is

a function of the monthly minimum wages established throughout the country. This means that the outstanding principal of the each mortgage is adjusted periodically, based on moves in the index.

Mortgage payments are automatically deducted from paychecks of borrowers, who have to work at a company affiliated with Infonavit, a condition met by all major private sector employers in the country. As part of Infonavit's policy, a borrower's employer covers 5% of the monthly mortgage payment.

(c) 2005 Asset Securitization Report and SourceMedia, Inc. All Rights Reserved.

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